IBM Bucks the Bearish Trend — Why I’m in on This Quantum Computing Play
The reason is simple — and here’s the setup.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
One Sarge-folio tech name is bucking the bearish trend Tuesday morning. That would be International Business Machines (IBM), also known as “Big Blue, also known simply as IBM.
This name has become my quantum computing play. I believe ultimately that IBM will be the winner in this space after either outgrowing the smaller quantum firms due to cash flows driven by its other businesses or will just buy the growth it needs to succeed in this space.
On Tuesday morning, JP Morgan analyst Brian Essex upgraded IBM to “overweight” from “neutral.” In Sarge-speak (common sense), that’s going to a buy from a hold. Essex also increased his price target to $291 from $270. It was not quantum computing that drew the upgrade, though. Essex cited increased confidence in a “second half of 2026” software acceleration following his analysis of IBM’s software business.
Essex points out that IBM faces Red Hat and OpenShift migration tailwinds, OpenShift strength amid growing AI-driven container adoption, and automation reacceleration as HashiCorp “taps increasing C-suite sponsorship.” Ultimately, he sees room for multiple expansion. Essex is rated at slightly better than four stars out of five by TipRanks. Over the past two years, he has a 54% success rate and has had a 17.4% average return.
This comes on top of last week, when Barclays analyst Raimo Lenschow reiterated his “buy” rating on IBM as well as his $350 price target. Lenschow is rated at three stars out of five by TipRanks. Over the past two years, he has a 41% success rate and an average return of 3.4%.
Now, My Reason…
Simple. IBM operates the world’s largest fleet of quantum computers. In fact, with more than 90 quantum systems deployed on a global scale, this is more than the rest of the industry in its entirety, combined.
IBM has a clear, published roadmap targeting quantum advantage, which is problem solving more quickly, more accurately and less expensive than classical computing, by the end of this calendar year.
In June, IBM announced a $10+ billion investment over the next five years to accelerate the process.
In Addition…
On Monday evening, President Trump signed two executive orders regarding quantum computing.
The first order directs the Energy Department to set technical specifications, which will almost certainly include the number and quality of qubits. Qubits are the basic units of information in quantum computing. The order separately instructs federal agencies that include NASA and the Department of Commerce to develop plans for deploying quantum-enabled sensors and networks, which is meant to ultimately improve scientific research.
The second order pertains to post-quantum cryptography. This is meant to address a coming vulnerability. The world can see that the rise of quantum computing will soon create technology powerful enough to unravel public-key cryptography. This would render current cybersecurity efforts obsolete. Yes, this includes blockchain technology.
The Chart
IBM is set to report earnings in about a month. I am sure that we will hear more on this at that time from CEO Arvind Krishna.
Readers know that I have been a fan of IBM for a while now. We’re still in the green on this name, but the shares have struggled of late. This is what I currently see:
IBM developed a large cup-with-handle pattern, which is bullish, that stretches back into January. The selloff associated with the adding of the handle found support at IBM’s 50-day simple moving average (SMA) after losing the 200-day SMA. That was key. That said, the 21-day exponential moving average (EMA) and 200-day SMA both still have to be retaken.
Looking at the indicators, Relative Strength has returned to a neutral reading after having been worse than that for more than a week. The daily moving average convergence divergence (MACD) is still nor postured for a bullish move but at least has stopped looking worse.
The histogram of the 9-day EMA has started working its way back towards the zero-bound. The immediate pivot for this name would be the 200-day SMA. That puts my current price target at $340. The pivot for the cup with handle is $330. Wanna get aggressive? That would put the price target up around $410.
Sell IBM? No thanks. Buy more before it hits that 21-day EMA? Almost definitely.
At the time of publication, Guilfoyle was long IBM equity.
